Q4 Employment Cost: Steady Wage Acceleration

Bottom Line: Deep into this cycle, wage gains are starting to accelerate again. While still not back to cycle highs, the employment cost index has been steadily rising for nearly 12 quarters now. The benefits component continues to decelerate as wages and salaries show accelerating gains. Wages and salaries for employees are the raw material for personal income which, in turn, supports consumer spending. Consequently, consumer spending growth should remain solid. The Employment Cost Index ROSE by 0.8% during the 3 months ended in September 2018, compared with market expectations for an increase of 0.7%. Labor compensation is 2.8% ABOVE its year ago level, modestly above the year-over-year increase in headline consumer inflation thus moving real labor compensation modestly higher. Employment cost inflation peaked at 4.4% in 2002 Wages and Salaries ROSE by 0.9% and are now 2.9% ABOVE their year ago level. Wages and salaries account for approximately 70% of total employment costs. Benefit Costs ROSE by 0.4% and are now 2.6% ABOVE their year ago levels. The year-on-year gain had accelerated between late 2009 and mid-2011 but has retreated since then. Benefit costs account for approximately 30% of total employment costs.